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Ricardo Aguado (University of Deusto) José Luis Retolaza (University of Deusto) Leire Alcaniz (University of Deusto)

Stakeholder Theory and Catholic Social Thought: A Holistic Approach towards a New Theory of the Firm

Stakeholder Theory and Catholic Social Thought: A Holistic Approach towards a New Theory of the Firm Catholic Social Thought (CST) has proposed a framework to understand the firm based on individual freedom, which is oriented towards creating entrepreneurial initiatives that take into consideration social responsibility and environmental care. In this view, the entrepreneur’s objective is to be a true innovator who generates economic initiatives that may benefit society. The encyclical Caritas in Veritate (CiV) calls on entrepreneurs to go beyond the logic of profit maximization, albeit without dismissing the need for profits aimed at economic sustainability of the firm, and describes the firm as a valuable site for creativity, job creation, and the generation of wealth and new products and services. Moreover, it points out that the firm’s management should not only consider the shareholders’ interests, but also those of all the agents that interact with it (workers, customers, suppliers, and others) and of the firm’s social and environmental setting. Likewise, the apostolic exhortation Evangelii Gaudium (EG) stresses the need for an inclusive understanding of the role of the firm. On the other hand, the encyclical Laudato Si (LS) links environmental care to social improvement and economic activity that is both profitable and sustainable. In Fratelli Tutti (FT) the persistence of social and economic problems is highlighted: unemployment, poverty, indifference toward the common good, selfishness. To face this situation, the role of individuals, corporations, social institutions, governments and communities is to create a society able to include, integrate and lift up people which have fallen or are lagging behind. However, the generally accepted view of the role and the objectives of the firm is still based on neoclassical thinking, which maintains that short-term profit maximization is the basic driver of the firm. In this paper, we depart from the stakeholder theory in an attempt to build a new theory of the firm that is closer to the main principles of Catholic Social Thought, while still being compatible with the market economy.